AI and Secondary Battery Themed Stocks Boom Drives 28% Increase in Market Alerts Last Year

Last year, the number of market alerts triggered by the Korea Exchange (KRX) increased due to the investment frenzy in theme stocks.

Korea Exchange, Yeouido, Seoul. Photo by Jinhyung Kang aymsdream@

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On the 26th, the Market Surveillance Committee of the Korea Exchange announced that the total number of market alerts designated last year was 2,643, a 28% increase compared to 2,062 cases the previous year. The year-on-year change rates for detailed categories were as follows: Investment Caution increased by 27% to 2,359 cases, Investment Warning rose by 57% to 224 cases, Investment Risk remained the same at 18 cases, and Trading Suspension increased by 8% to 42 cases. The Exchange explained that "the increase in designations compared to the previous year was due to the expansion of global economic volatility and the continued frenzy around theme stocks centered on innovative technologies such as Artificial Intelligence (AI) and secondary batteries."

Among Investment Caution types, the advance notice of Investment Warning and excessive involvement in spam accounted for 21% and 20%, respectively. Additionally, the type involving excessive purchases by a small number of accounts surged by 109.1% compared to the previous year, showing the largest increase.

For Investment Warning, the short-term surge (5 days) type accounted for the highest proportion with 150 cases (67%). A short-term surge refers to cases where, after being designated as Investment Warning advance notice (Investment Caution), the closing price on the day of designation rises by 60% or more compared to the closing price five days earlier or reaches the highest price within the last 15 days.

Investment Risk was dominated by ultra-short-term surge (3 days), accounting for 12 cases (67%). Ultra-short-term surge means that after being designated as Investment Warning, the closing price on the day rises by 45% or more compared to the closing price three days earlier and is the highest within the last 15 days.

Trading Suspension cases mostly involved trading halts due to sharp price increases during Investment Warning designations, totaling 24 cases (57%). When the stock price is higher than the day before the Investment Warning designation and the previous trading day, and the two-day increase rate exceeds 40%, trading is suspended for one day.

The total number of market alerts designated for major themes was 817 cases (31%). Unlike 2022, which was characterized by volatility mainly due to corporate events such as mergers and acquisitions and theme stocks, last year saw more than half of the theme designations related to the ongoing investment enthusiasm for Artificial Intelligence (AI) and secondary batteries. Other themes such as war/terrorism, superconductors, and politicians also appeared.

Requests for disclosure inquiries due to significant market fluctuations last year totaled 93 cases. Disclosure inquiries related to market fluctuations increased by 52 cases (126.8%) compared to the previous year, driven by significant price rises in theme stocks such as politicians and AI. Among the disclosure inquiry requests, theme stocks accounted for 43 cases (46%), with inquiries related to politicians and AI theme stocks making up half of these at 21 cases.

Regarding response status, most responses from listed companies to disclosure inquiries were "No material disclosure" (68 cases, 73%). Many listed companies had no significant decision-making, and in many cases, it was difficult to sufficiently explain the reasons for sharp price changes due to the theme stock frenzy.

The Exchange evaluated that through the operation of the market alert and disclosure inquiry systems, there were effects such as ▲prevention of unfair trading and minimization of investor damage ▲suppression of short-term sharp price increases ▲improvement in timeliness of preventive measures against new types of unfair trading ▲curbing herd trading in theme stocks ▲and mitigation of stock price volatility.

An official from the Exchange stated, "We will enhance the efficiency and appropriateness of the market alert designation and disclosure inquiry system for sudden market changes to prevent unfair trading in advance and maintain a stable market order." They added, "We will closely monitor changes in the market environment and continuously analyze the operational effectiveness to strengthen the system's effectiveness." Furthermore, they said, "We plan to strive for investor protection through system improvements that can timely reflect market conditions."

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